Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. The parent company, Alphabet, is set to disclose its earnings on Tuesday.
According to Bank of America and Wedbush, the integration of AI technologies such as Gemini into Google Cloud and AI Overviews in Google Search is expected to enhance revenue. Analysts Justin Post and Nitin Bansal expressed confidence in the company’s growing AI integrations, noting that expanded AI overviews could stimulate increased activity in the core Search business, despite some initial issues that led to jokes about the tool’s accuracy. They have raised their price target for Google’s stock from $200 to $206.
In the first quarter, Google reported a remarkable profit increase of 60%, significantly attributed to its AI developments, which resulted in a surge in stock price and a market capitalization exceeding $2 trillion, alongside industry leaders like Apple, Microsoft, and Nvidia.
Google’s performance was bolstered by a series of new AI product launches, including exciting features unveiled at the Google I/O developer conference, where it introduced a universal AI assistant capable of interaction through smart glasses. The new Gemini AI is reported to be 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed more caution regarding the potential of AI Overviews in directly boosting revenues, he noted that AI is already contributing to growth in Google Cloud services. Many analysts, including Ives, predict a 27% increase in Cloud revenue year-over-year.
Doug Anmuth from J.P. Morgan similarly conveyed optimism, identifying Google as one of the firm’s top tech stock picks—alongside Uber and Amazon—due to what his team sees as promising progress in generative AI leading up to Alphabet’s earnings report.
However, Josh Beck from Raymond James cautioned that, despite the current favorable narrative surrounding Google’s AI initiatives, the long-term impact on sales remains uncertain.